MARCH 2019

America’s Skills Gap:

Why It’s Real, And Why It Matters
BY RYAN CRAIG

At the start of 2019, Last fall, following publication of my new book, A

7 million U.S. jobs remained
unfilled, and American
employers consistently cite
trouble finding qualified
workers. While some liberals
New U: Faster + Cheaper Alternatives to College, I
was on a panel at a Boston book fair with another
author, a professor at a nearby university. After I
presented a few U.S. Department of Labor
statistics on unfilled jobs in America, she
responded by saying: “I don’t believe it. I don’t
believe your numbers.” Why? Because she hadn’t
encountered the problem herself.

insist a "skills gap" doesn't She’s not alone. In January 2019, lefty blogger
exist, all evidence points to and provocateur Matt Yglesias published an 1
article in Vox headlined, “The ‘skills gap’ was a lie.”
the contrary. These gaps are He claimed the skills gap “was the consequence
moreover made worse by a of high unemployment rather than its cause…
With workers plentiful, employers got choosier.
higher education system Rather than investing in training workers, they
that ill-equips graduates for demanded lots of experience and educational
credentials.”
the workforce.
Those who haven’t ever worked in the private
sector might be forgiven for being skeptical about the existence of a skills shortage. But employers
know that America has a significant skills gap – one that is growing with each passing month. And
you won’t find many skill gap skeptics among underemployed workers, particularly Millennials.

America’s economy has digitized over the past decade and our legacy infrastructure –
postsecondary education institutions and workforce development boards – have not come close to
keeping up. Moreover, the digitization of the economy has also changed hiring practices, with real
implications for our workforce. In this whitepaper, I attempt to explain to the skeptic crowd that the
skills gap is real, why we haven’t closed it, and why it matters.

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America’s Skills Gap:
Why It’s Real, And Why It Matters
THE SKILLS GAP IS REAL
There can be no question that American
employers have a record number of unfilled jobs.
For the past year, the number has hovered around
7 million. As of early January 2019, the number
reported by the U.S. Department of Labor Bureau
2
of Labor Statistics (BLS) was 6.9 million.
Faced with real numbers, skill gap skeptics make
several arguments besides denying the validity of
the BLS data (which, if they care to look, comes
with an impressive level of rigor and backup).
First, they say that millions of unfilled jobs are the
fault of employers, because there are candidates
with potential but not experience who are being
passed by. Data suggest that many employers
now insist that candidates have already done the
job, even for entry-level jobs. For instance, a
recent survey found that 61 percent of all full-time
entry-level openings require at least three years of
experience.3
Observing this phenomenon, Peter Capelli of
Wharton notes that American employers have
developed a global reputation for wanting the
perfectly qualified candidate delivered on a silver
platter—or they simply won’t hire. According to
Capelli, “Employers are demanding more of job
candidates than ever before. They want
prospective workers to be able to fill a role right
away, without any training or ramp-up time. To get
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a job, you have to have that job already.” Capelli
calls this the “Home Depot view of the hiring
process,” where filling a job vacancy is “akin to
replacing a part in a washing machine.” The store
either has the part, or it doesn’t. And if it doesn’t,
the employer waits.
It’s true that American employers have moved the
goalposts when it comes to whom they hire. But
it’s also unrealistic to expect that employers can
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close the skills gap on their own simply by hiring
legions of unskilled entry-level employees and
training them up to where they need to be. Two
reasons explain why. First is the increasing cost
of bad hires; experts estimate that the cost of a
bad hire now exceeds six months of that
employee’s salary, which means companies are
increasingly reluctant to take the leap with
employees about whom they’re not confident can
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do the job. The second reason companies are
demanding better-qualified candidates upfront is
the higher rate of churn for entry-level
employees. Footloose Millennials are more likely
to jump to another job at the first opportunity,
which disincentivizes employers from investing in
training. Whereas a generation ago, employers
viewed entry-level hire training as an investment
in their own future, today it’s seen through the
lens of the free-rider problem: investing in
entry-level training is more likely a gift to a
company’s competitors, and hence, for suckers. It
is this thinking that has produced the new status
quo of “do the job before getting the job.” The
upshot is that candidates who would have been
snatched up a generation ago are now left sitting
on the sidelines.
A second claim from skills gap skeptics is that the
6.9 million unfilled jobs are not skilled jobs, but
rather low-skill jobs. This line of argument casts
the “true” gap as one of labor, not skills. So while
the engine of America’s dynamic economy is
humming along, millions of jobs in agriculture,
hospitality, and custodial services are unfilled.
As of January 2019,
6.9 million jobs
remained unfilled.
America’s Skills Gap:
Why It’s Real, And Why It Matters
BLS has relevant information on this point.
Last fall, there were around 900,000 unfilled
jobs in accommodation and food service, but
also nearly 1.2 million unfilled openings in
professional and business services, and
another 1.3 million in education and health
services.6 While some of these positions are
certainly lower skill (e.g., medical assistants),
a significant percentage of America’s unfilled
jobs are skilled positions. According to
Burning Glass, there are 1.7 openings for
every qualified worker in high-skill healthcare
jobs like nurse practitioners, physician’s
assistants, physical therapists, and
occupational therapists. The job site
indeed.com alone lists nearly a million open
positions with salaries at or above $75,000.
But what’s most convincing is the steady
drumbeat of surveys and reports
demonstrating that employers really are
having a hard time finding candidates for
middle and high-skill positions. As Burning
Glass has recognized, “Our research shows
that roles requiring highly skilled workers…
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are the most undersupplied roles.”
Let’s drill down on the two primary reasons
why employers are leaving middle and
high-skill positions unfilled: (1) They are
failing to find enough candidates with the
requisite digital skills; and (2) They are
dissatisfied with the “soft skills” presented by
candidates, even those with digital skills.
1. The Digital Skills Gap
The World Economic Forum found only 27
percent of small companies and 29 percent
of large companies believe they have the
digital talent they require.8 Three quarters of
Business Roundtable CEOs say they can’t
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find workers to fill jobs in STEM-related fields.
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Deloitte in the United Kingdom has found
that only 25 percent of “digital leaders”
believe their workforce is sufficiently skilled
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to execute their digital strategy. Another
survey found 80 percent of executives
highly concerned about a digital skills gap.
11
And for the first time in recent memory, in
May, August, and September 2018, the
TechServe Alliance, the national trade
association of technology staffing and
services companies, reported no tech job
growth in the U.S. According to TechServe
Alliance CEO Mark Roberts, “this is totally a
supply side phenomenon. There are simply
not enough qualified workers to meet
demand.”
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There are two primary reasons for the large
digital skills gap. The first is a real
transformation in how we do business. It’s
not just that there are more digital devices
(or that you’re almost certainly reading this
paper on a screen). It’s that over the past
decade, businesses and organizations
have transformed their internal systems, as
well as their processes for interacting with
stakeholders – customers, suppliers,
employees, shareholders – from informal
and manual to formal software-based
processes. Across all sectors, most
middle- and high-skill jobs now involve
managing some business function through
software or software-as-a-service (SaaS)
platforms. According to Brookings, only 41
million American jobs still don’t require
significant digital skills; nearly 100 million
do. Two-thirds of the jobs created in the
last decade require either high or moderate
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digital skills. But it’s inexact to generalize
about a digital skills gap.
America’s Skills Gap:
Why It’s Real, And Why It Matters
The digital skills gap actually
consists of thousands of micro-level
or tactical digital skills gaps.
For example, we don’t have a shortage of C++ or
Fortran coders, although there’s huge unmet
demand for J2EE, Microservices, and .NET
developers. Depending on whom you ask, the
total number of positions that require coding
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skills ranges from 500,000 to 1 million. But the
gap extends well beyond coding to positions
outside the formal technology sector. These are
jobs that manage functions like supply chains,
sales, marketing, customer service, finance, IT,
and HR. Employers are seeking skills like Pardot
(marketing), Marketo (digital marketing), Google
Adwords (digital marketing), ZenDesk Plus
(customer service), NetSuite (finance), Financial
Force (finance), Workday (HR), and the customer
relationship management (CRM) platform
Salesforce – the most popular SaaS platform in
American businesses. According to Burning
Glass, jobs demanding Salesforce experience
have quadrupled in the past five years; in 2017,
more than 300,000 open positions called for
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Salesforce skills. In addition to these
cross-sector SaaS platforms, every industry has
its own SaaS platforms for specific functions.
For example, insurance companies and
third-party claims administrators have a range
of SaaS options for claims processing.
All of these career-critical business software
platforms require specific know-how that is a far
cry from the relatively little you need to know to
navigate Netflix, Spotify and smartphone
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interfaces. This leads to the second reason why
the digital skills gap exists: The assumption that
comfort navigating in a digital environment is
the same as having the digital skills necessary
to land a well-paying job. Eleanor Cooper,
Co-Founder of Pathstream, a start-up partnering
with higher education
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institutions to provide business software
training, notes that we are “accustomed to
Instagram-like platforms which are both intuitive
and instantly gratifying. But without exception,
we find the user experience of learning business
software to be exactly the opposite: instant
friction and delayed gratification. Students first
face an often multi-hour series of technical
steps just to get the software set up before they
begin working through tedious button-clicking
instructions, which are at best mind-numbing
and at worst outdated and inaccurate for the
current version of the software.”
In a recent article in The New Yorker, “Why
Doctors Hate Their Computers,” Dr. Atul
Gawande describes the challenge of
implementing Epic, a SaaS platform for
managing patient care: “recording and
communicating our medical observations,
sending prescriptions to a patient’s pharmacy,
ordering tests and scans, viewing results,
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scheduling surgery, sending insurance bills.”
First, there’s 16 hours of mandatory training.
Gawande “did fine with the initial exercises, like
looking up patients’ names and emergency
contacts. When it came to viewing test results,
though, things got complicated. There was a
column of thirteen tabs on the left side of my
screen, crowded with nearly identical terms:
‘chart review,’ ‘results review,’ ‘review flowsheet.’
We hadn’t even started learning how to enter
information, and the fields revealed by each tab
came with their own tools and nuances.”
Business software is really hard. We are
accustomed to simple interfaces. But simple
interfaces are possible only when the function is
simple, like messaging or selecting video
entertainment. Today’s leading business
software platforms don’t just manage a single
function. They manage hundreds, if not
thousands.
America’s Skills Gap:
Why It’s Real, And Why It Matters
Beyond cumbersome interfaces, the second
reason why business software is really hard is
that it has become inextricably and tightly wound
up with business processes. Salesforce
consultants will tell you it’s easier to conform
your business practices to Salesforce than to try
to customize (or even configure) Salesforce to
support the way you do business today. And
that’s true for almost all business software. As
Gawande notes, “as a program adapts and serves
more people and more functions, it naturally
requires tighter regulation. Software systems
govern how we interact as groups, and that
makes them unavoidably bureaucratic in nature.”
Software-defined business practices are
increasingly standardized across functions and
industries, and highly knowable. And because
they’re knowable, hiring managers want to see
candidates who know them. Unfortunately,
candidates find themselves at sea with business
software – even platforms with the best
interfaces – unless they have a basic
understanding of the underlying business
processes. So it’s not just a digital skills gap.
Embedded in the digital skills gap is a gap in
industry and/or job function expertise. And that
requires much more than 16 hours of training.
2. The Soft Skills Gap
Behind digital skills, as evidenced by job
descriptions, employers care a great deal about a
second set of skills: soft skills like teamwork,
communication, organization, creativity,
adaptability, and punctuality.
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Employers want workers who will show up on
time and focus on serving customers rather
than staring at their phones. They need
employees who are able to get along with
colleagues, and take direction from supervisors
- a particular challenge for headstrong
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Millennials.
But soft skills aren’t screened at the top of the
hiring funnel.Employers aren’t likely to list
“willingness to take direction” or “humility” as
skills in job descriptions. And the soft skills that
are listed aren’t readily assessable from
résumés. So soft skills are evaluated further
down the hiring funnel, via interviews – and long
after the initial screen (primarily on digital skills)
has weeded out many candidates with strong
soft skills. It’s no wonder employers don’t think
candidates’ soft skills are up to snuff. In a
LinkedIn study of hiring managers, 59 percent
said soft skills were difficult to find and this skill
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gap was limiting their productivity. A 2015 Wall
Street Journal survey of nine hundred executives
found that 89 percent have a very or somewhat
difficult time finding candidates with the
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requisite soft skills.
One reason for the soft skills gap is that Millen-
nials (and now Generation Z) have less
exposure to paid work than prior generations.
When older Americans were in high school, even
if they weren’t working during the school years,
they probably took summer jobs. Some worked
in restaurants or painted houses, others mowed
lawns or scooped ice cream. But in the summer
of 2017, only 43 percent of 16-19 year-olds were
working or seeking work – down from nearly 70
21
percent a generation ago. The Bureau of Labor
Statistics forecasts teen workforce participation
will drop below 27 percent by 2024.
America’s Skills Gap:
Why It’s Real, And Why It Matters
These work experiences are seminal to the
development of the soft skills employers are
seeking. Writing in the Washington Post, Jeff
Selingo noted: “I worked in a hospital kitchen
filling orders for patients. It was probably the
worst job I ever held, but it was the first time I
wasn’t surrounded by my peers, so it taught me
how to interact with people of all backgrounds
and ages. I also learned the importance of
showing up on time, keeping to a schedule,
completing tasks, and paying attention to
details (after all, I didn’t want to mess up a tray
22
for a patient on a specific diet).”
Ironically, parents seeking to give their children
a leg up by encouraging them to burnish their
college applications with unpaid internships
and travel programs – at the expense of paid
part-time work – may be handicapping them by
denying them the soft skill development that
they’ll need to land a good first full-time job. As
a society, we have unfairly and improperly
devalued dishwasher and busboy jobs as useful
steps on the road to successful careers.
It’s also quite possible that the digital skills gap
is contributing to the soft skills gap. Candidates
who are visible to hiring managers are the ones
with digital skills; they’re the candidates who
consistently get past the applicant tracking
system filters. And for many of the most
technically prepared candidates, soft skills
aren’t their strong suit. Meanwhile, the most
punctual, organized, and well-spoken
candidates are lacking digital skills and are
effectively invisible in the hiring process.
As a result, interviews reveal a candidate pool
that seems lacking in soft skills.
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WHY WE HAVEN’T
CLOSED THE SKILLS GAP
None of these missing skills are surprising to
candidates or employers. So why does the skills
gap persist? The skills gap is best thought of as
the product of two distinct frictions.
On the student or candidate side, there is what I
call “Education Friction.” Education Friction
means that because of the time, the cost and –
most important – the uncertainty of a positive
employment outcome, many individuals fail to
upskill themselves. If we could eliminate
Education Friction, millions of candidates would
immediately equip themselves with the digital
skills, industry and business process knowledge,
and soft skills that employers are seeking.
On the employer side, there’s what I’ve dubbed
“Hiring Friction.” Hiring Friction encapsulates
Capelli’s observation: a growing reluctance of
employers to hire candidates who haven’t
already proven they can do the job. Hiring
Friction helps to explain all the unfilled good
jobs, and why employers are increasingly
requiring years of relevant experience for
positions that should be (and once were) entry
level.
Any solution to closing the skills gap must
address both Education Friction and Hiring
Friction. And a review of the current players
ostensibly in the gap-filling business explains
why we’re not closing the gap.
America’s Skills Gap:
Why It’s Real, And Why It Matters
EDUCATION FRICTION:
How colleges and universities
are perpetuating the skills gap
With their continued focus on multi-year,
expensive degree programs, colleges and
universities are a major source of Education
Friction. College is increasingly unaffordable;
the average student who borrows to attend
college graduates with nearly $40,000 in
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student loan debt.
Total student loan debt is now over $1.5 trillion,
and average student loan debt per household
has grown almost 1,000 percent in the past 20
24
years. And because life tends to “get in the
way” of any multi-year task – particularly for
students most in need of the social mobility
that postsecondary education is supposed to
provide – nearly half of all students who under-
take degree programs fail to complete (and
many drop out with debt – the worst of both
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worlds).
Nevertheless, with changing job requirements
and unhappy employers, you’d think colleges
and universities would be scrambling to
address these market opportunities and boost
enrollment with new and innovative degree
programs. But academic programs at
accredited postsecondary institutions are
controlled by faculty members who typically
aren’t incentivized to align curricula to employer
needs. Few are interested in what employers
are seeking, particularly for entry-level
positions. Many have never worked in the
private sector or have only outdated or tenuous
connections to non-academic employers.
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Many more educators simply resist the idea
that instruction should be aligned to
employment opportunities. A report last year in
American higher education’s paper of record,
the Chronicle of Higher Education, sums up the
view of traditional colleges and universities on
this question. In an article on Texas A&M’s
effort to launch courses in cybersecurity, the
Chronicle reached the following conclusion:
“Work-force demand can lead some institutions
to teach students the skills needed for today’s
entry-level jobs. But those tools may well be
26
obsolete five or ten years from now.” The
implication – one that is absolutely in the
mainstream of faculty thinking – is that
updating curriculum to reflect current labor
market needs may not be a worthwhile pursuit
because such needs will change in five to ten
years. This is certainly true for digital skills, but
also for industry knowledge and perhaps even
soft skills (which are arguably furthered less on
a cloistered college campus than in virtually
any workplace setting). In no other sector of the
economy is such outdated thinking
commonplace.
But even if faculty incentives and attitudes
could be changed, the organizational structure
of colleges and universities complicates any
effort to align programs with employer needs.
Hundreds of thousands of new jobs have been
created in business intelligence and data
analytics over the past few years. But where do
they fit into existing academic departmental
structures? Some business schools have added
relevant curriculum; at other universities, it’s the
statistics department. Under faculty control,
most universities haven’t yet come up with an
adequate answer.
America’s Skills Gap:
Why It’s Real, And Why It Matters
The same dynamic exists in other high
demand areas like nursing and cybersecurity.
Because few faculty members study or
research the topic, few if any nursing
programs train students on Electronic
Records Management Systems. And the
skills required for cybersecurity require some
computer science curriculum, but are a
distant relative from learning C++. At Texas
A&M University, cybersecurity courses have
been offered by engineering as well as
agriculture and life sciences departments.
Higher education’s interface of choice to
employers is career services. But not only is
career services well outside the academic
chain-of-command, the concept of “career
services” as a separate office, distinct from
every other part of the institution, conveys to
students that they aren’t expected to think
about employment until senior year. Not
surprisingly, only half of all students ever visit
career services.27
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When they do, they’re not meeting with
professionals in their fields of interest (with
relevant experience and networks), but rather
with career services lifers, who may be best
positioned to help students get jobs working
in career services.
Even if they were interested in engaging with
employers, colleges and universities wouldn’t
be able to do much about the frictions
sustaining America’s yawning skills gap. And
as employers are simply presented with the
decision to hire or not hire graduates, colleges
remain poorly positioned to do anything
about Hiring Friction.
Total spending on education and training is
heavily weighted to the first 25 years of life.
According to the Council of Economic
Advisers, most spending is exhausted by age
17, and more than 90 percent of spending is
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complete by age of 25. The prevailing view
has been to position postsecondary
education as a kind of “all you can eat in one
sitting” buffet: get it done, then get to work.
America’s Skills Gap:
Why It’s Real, And Why It Matters
America’s colleges and universities have cap-
tured the lion’s share of non-employer spending
on human capital development beyond high
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school, to the tune of over $500 billion annually.
In contrast, public spending on workforce
development falls far short. In terms of formal
spending on education and training, in 2016, the
federal government spent over $139 billion
through Title IV financial aid, the GI Bill, and
other sources. Of this total, only $19 billion –
14 percent – was allocated to career education
30
and training. Department of Labor funds don’t
add much. Federal spending on workforce
development through the Workforce
Opportunity Investment Act (WIOA) is only
about $1 billion (the remainder of the $3.3 billion
in WIOA spending is allocated to disability and
youth programs).
Where the workforce development spending
goes is also problematic. As defined in WIOA,
funds are allocated to state and local workforce
development or investment boards. These
organizations are responsible for spending
federal and state workforce dollars on “one
stop” services to help job seekers find jobs. And
while they are ostensibly charged with human
capital development and maintain long laundry
lists of training programs operated by nonprofit
organizations and traditional colleges and
universities, they are measured based on
speed-to-placement, not on value added. As a
result, workforce boards find themselves in a
vicious circle of attracting only low skill workers,
and employers listing the lowest skill positions;
there’s little opportunity or rationale for value
add.
While workforce solutions typically have no
financial cost to candidates, like free college,
they don’t eliminate Education Friction: no
one-stop guarantees jobs, and particularly not
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good jobs. And as with higher education,
workforce boards aren’t well positioned to
eliminate Hiring Friction for employers.
HIRING FRICTION: How employers
aren’t helping themselves
At the same time that skills shortages are
real, employers are handicapping themselves
in their hunt for qualified candidates.
Recruitment and hiring practices have also
not been immune to digitalization, but the
result has been an over-emphasis on digital
skills at the top of the hiring funnel, which
serves to shut out qualified candidates
whose résumés lack the magic words to get
them in the door.
Because nearly every good job is posted
online and generates hundreds of résumés,
employers utilize keyword-based filters
called Applicant Tracking Systems to
determine which résumés are actually seen
by a human. If you don’t have sufficient
keyword density, you’re not visible. Faced
with the deluge of résumés over the past
decade, HR and hiring managers have
sought to tighten the screen and have done
so by adding skills to job descriptions. Which
skills have they added? Unfortunately, there
are only so many ways to say “critical
thinking,” or “problem solving.” So the skills
that have been added to job descriptions are
digital and software skills. Across virtually
every industry, technical skills now
outnumber all other skills in job descriptions,
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particularly for entry-level jobs. Without the
digital skills employers are increasingly
listing in entry-level job descriptions, too
many college graduates are invisible for
exactly the positions they want (and need in
order to make student loan payments).
America’s Skills Gap:
Why It’s Real, And Why It Matters
Nevertheless, fixing digital hiring practices will
not make the skills gap go away. If anything,
current trends will only accelerate. Anyone
who’s spent any significant time inside large
and mid-size American businesses in recent
years will recognize that the alphabet soup of
business software represents the present of
work. And anyone who’s been reading dire
predictions about the future of work – from
one of the many “future of work” centers at
foundations and think tanks that have emerged
in the past few years – will tell you that it’s
going to get worse. Predictions about artificial
intelligence and robotic process automation
spell doom for tens of millions of lower skill
positions, while simultaneously creating tens of
millions of new digital-centric jobs. Based on
the booming “future of work” business, it
sometimes seems like our kids have two
choices for gainful employment: (1) Digital
skills; or (2) Develop skills to predict the future
of work. And while it may be silly to predict that
half of all current jobs will disappear, it’s not
silly or extreme to believe, as at least one
presidential candidate does, that we’re about to
“experience the greatest technological and
economic shift in human history.”
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THE SKILLS GAP MATTERS
Perhaps taking inspiration from the growing
“deficits don’t matter” crowd, some skeptics
shrug their shoulders at the skills gap. But
that’s a dangerous approach. There are few
challenges more consequential to America’s
future than the skills gap. The skills gap is
impeding economic growth, promoting
generational inequity, and destroying the
American Dream.
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ECONOMIC GROWTH
If we could close the skills gap, it’s likely we’d
experience faster economic growth. In a recent
survey of U.S. hiring managers, 90 percent
reported it difficult to find and hire the right tech
talent and 83 percent said the shortage of tech
33
talent is slowing company revenue growth. As a
result, most Americans are experiencing
negative repercussions of the skills gap. But the
biggest casualties are the 10 million workers
who have stopped seeking work and dropped
out of the workforce in the last decade – many
because they didn’t have the skills employers
were seeking.34 And don’t forget the tens of
millions of Americans who remain employed, but
whose real wages have remained stagnant
because they are out of position relative to the
jobs and sectors of the future.
FAILURE TO LAUNCH
While these casualties are disparate and hard to
measure, the most distinct and visible victims of
the skills gap are Millennials, who have been
poorly positioned for employment, and are
performing worse on virtually every economic
metric than prior generations. Millennials are
earning 20 percent less than Baby Boomers did
35
at the same stage in their lives. They are
increasingly unable to afford their own
residences.36 And in an era when it’s easier than
ever to launch a new business, Millennials are
remarkably unentrepreneurial.37
America’s Skills Gap:
Why It’s Real, And Why It Matters
Millennials aren’t starting new businesses for the
same reasons that few of them are unemployed:
because most take the first job that allows them
to make payments on their student loans. But
although not unemployed, a surprising
percentage are underemployed as a result of a
lack of digital skills.
Ironically – because they’re most comfortable in
a digital world – the digital skills gap might be
hitting Millennials hardest. As a result of higher
education’s failure to adapt to employer
requirements for entry-level jobs, too many new
and recent graduates find themselves working in
retail jobs they could have attained without the
investment of time and debt.
Underemployment is a lot harder to define than
unemployment. The Rockefeller Foundation
found that 49 percent of recent college
graduates reported they didn’t need to go to
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college to do their current jobs. Accenture found
51 percent of 2014 and 2015 graduates
39
considered themselves to be underemployed.
Avenica, a provider of career pathways for new
college grads, found that 86 percent of brand
new college graduates reported having no job
40
offers. More authoritatively, the National Bureau
of Economic Research has found that the
unemployment rate of recent college graduates
spiked at 7 percent post-recession and remains
north of 5 percent, while underemployment
remains near an all-time high of around 45
percent.41
In his 2016 book There Is Life After College, Jeff
Selingo found that only about a third of all new
graduates were successfully launching careers.
Two-thirds were suffering through what the
media has taken to calling Millennials’ “failure to
launch.” 42
P11
This has led to satirical headlines in The Onion
like “Company Immediately Calls Job Applicant
Upon Seeing ‘B.A. In Communications’ on
43
Résumé.” And it has further led to a cottage
industry for journalists writing articles like this
one in Cosmopolitan: “10 Reasons Why You
Shouldn’t Freak Out if You’re Graduating Without
a Job (You are so not alone).” Among the silver
linings: you don’t have to deal with coworkers
you don’t like, moving back home is the best
living situation you’ll have for a long time, and
you can sleep all you like.44
More frustrating is that wages haven’t improved
for college graduates since the Great Recession.
In fact, they’ve continued to fall, even for
students who majored in STEM. In 2015, new
graduates who majored in biology had average
salaries of $31,000, down from $35,000 in 2010.
Even computer science and engineering grads
45
saw a decline. This helps explain why only 41
percent of recent graduates have been able to
pay down any principal on their student loan
balances in the first three years after leaving
46
school and why the Federal Reserve Bank of
New York found that the bottom 25 percent of
new college graduates are incurring debt but
47
earning no more than high school graduates.
We also know that lower wages for new
graduates tends to result in “wage scar-
48
ring”—lower wages that persist for decades.
A new study from the Social Security
Administration and a number of researchers,
including Fatih Guvenen, an economist at the
University of Minnesota, attributes the increase
in lifetime inequality over the past fifty years to “a
result of lower incomes at younger ages.”
According to Guvenen, “It all starts at age
49
twenty-five,” or with suboptimal first jobs.
 America’s Skills Gap:
Why It’s Real, And Why It Matters

ECONOMIC ALIENATION She went on to cite a 2016 Harvard poll that

showed 51 percent of eighteen to twenty-nine
year olds rejected capitalism.51 According to
The skills gap has created another, arguably
Richard Wolff, a Professor of Economics at the
more damaging gap. America’s employers love to
New School University and one of America’s few
signal near-unlimited potential for employment
remaining Marxist economists, due to growing
and career advancement. With all the well-paid,
awareness that wages have been unable to keep
high-skill jobs on offer, job seekers who visit
up with the cost of living, younger Americans
indeed.com or another leading job site may be
“are getting closer and closer to understanding
forgiven for thinking the world is their oyster.
that they live in an economic system that is not
working for them, and will not work for their
But these opportunities are effectively closed to
kids.” 52
millions who don’t have the skills on their résumé
to make it past the Applicant Tracking System
On the other end of the political spectrum,
screen, let alone a risk-averse human resources
Donald Trump was prescient enough to exploit
manager. This gap between the promise of
this vulnerability, raging against elites who
opportunity and the reality of inaccessibility
dominated America’s economy and politics, and
creates what the UK Labour Party MP Paul
higher education in particular. As former
Sweeney called in this spring’s Brexit debate
Secretary of State and now Stanford University
“economic alienation,”which “has caused many of
professor Condoleeza Rice said in a May 2017
the problems and anger in the UK.”
interview, “One of the things that broke down and
one of the reasons we got the election we
Economic alienation explains why so many
did—as my friend calls it, the ‘Do You Hear Me
Americans feel left behind and disenfranchised.
Now’ election—is too many people have felt that
Far too many of our fellow citizens feel that 53
the American Dream isn't there for them.”
participation in the dynamic economy – and the
American Dream – is now out of reach.
America’s economy is increasingly divided How to close the skills gap
between haves and have nots.
Secretary Rice’s solution is a national project on
education and job skills. 54 But economic
On one side, the skills gap may be prompting
alienation has given rise to a surprisingly wide
Millennials to give up on capitalism, or at least to
range of policy proposals. Free college is
say they are. In “Why Young Voters Love Old
becoming progressive orthodoxy, and a
Socialists,” Sarah Leonard, a twenty-nine-year-old
surprising number of progressives (and some
editor at The Nation, wrote in the New York Times
conservatives and libertarians) are toying with
that “Millennials are worse off than their parents
universal basic income (UBI). But these ideas
were . . . they are loaded with college debt (or far
haven’t been tested along the following lines:
less likely to be employed without a college
50
degree).” She concluded that “the post-Cold War
• Do they eliminate Education Friction?
capitalist order has failed us.” But fear not, there’s
• Do they eliminate Hiring Friction?
a great alternative: “Because we came to political
• Can they scale to tens of millions of
consciousness after 1989, we’re not instinctively
individuals?
freaked out by socialism.”

P12
America’s Skills Gap:
Why It’s Real, And Why It Matters
Even if we could figure out how to pay for it, free
college isn’t actually free. Tuition might be free, but
what about the tens of thousands of dollars of
living expenses required to support a college
student? Even for a “free college” student, there is
no such thing as a free lunch. Furthermore,
because free college says nothing about
employment outcomes (let alone employment
guarantees), it only has a marginal impact on
Education Friction. Likewise, it also completely
fails to address Hiring Friction.
UBI is the bluntest instrument being proposed in
that it does nothing to eliminate either friction.
With its sledgehammer approach, UBI might help
close the skills gap, but only by reducing the
relevance of skills – probably not a winning
proposition. Moreover, like free college, the scale of
UBI is a direct function of government spending,
and any effort to implement such a program will
likely substantially worsen the nation’s already
severe fiscal woes.
While the search for solutions to close the skills
gap becomes ever more urgent, it’s most
important that we not give up. In the Washington
Post, CUNY’s Cathy Davidson rejected higher
education’s responsibility for the skills gap, saying
About the Author
Ryan Craig
@ryancraigap
P13
“the most relevant education in the world cannot
change a labor market rigged against the middle
class. This is a social problem, not a higher
education problem.”
55
But even if she’s right (and at best, she’s only
partially right), mission-driven public and
not-for-profit colleges universities ought to be
motivated to try to solve this “social problem”
rather than sit there throwing stones at capitalism.
To paraphrase Donald Rumsfeld, we're sending
young people out into the labor market we have,
not the labor market we might want or wish to
have at a later time.
In my next paper, leveraging this framework, I
propose a series of models for closing the skills
gap: models with the promise of eliminating both
Education Friction and Hiring Friction. While these
models are led by private sector intermediaries
with a commercial incentive to scale to provide
frictionless pathways to good jobs for tens of
millions of Americans, the public and nonprofit
sectors will play a key role in accelerating
adoption.
Ryan Craig is a co-founder and
Managing Director of University
Ventures and the author of A New U:
Faster and Cheaper Alternatives to College.
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19, 2019. https://www.burning-glass.com/wp-content/uploads/Skills_Gap_Different_Skills_Different_Gaps_FINAL.pdf.
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18 Nordstrom, Todd. "Want to Get Your Next Job? Try Showing More Humility." Inc.com. October 18, 2017. Accessed February 19,
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21 Steverman, Ben. "Why Aren't American Teenagers Working Anymore?" Bloomberg.com. June 05, 2017. Accessed February 19,
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22 Selingo, Jeffrey J. "A Lazy Summer for Teenagers: Why Aren't More of Them Working?" The Washington Post. June 09, 2017.
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24 Ahmed, Naema. "Average U.S. Household Has 828% More Student Debt than in 1999." Axios. July 21, 2017. Accessed February
19, 2019. https://www.axios.com/average-us-household-has-828-more-stu-
dent-debt-than-in-1999-1513304182-a6f50614-9d74-412a-b50d-905853958df3.html.
Corkery, Michael, and Stacy Cowley. "Household Debt Makes a Comeback in the U.S." The New York Times. May 17, 2017.
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25 "Completing College - National - 2015." National Student Clearinghouse Research Center. November 26, 2015. Accessed
February 22, 2019. https://nscresearchcenter.org/signaturereport10/#ExecutiveSummary.

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26 Najmabadi, Shannon. "How to Revamp a Curriculum Quickly - But Not Too Quickly." The Chronicle of Higher Education. May 21, 2017. Accessed
February 22, 2019. https://www.chronicle.com/article/How-to-Revamp-a-Curriculum/240130.

27 Marcus, Jon. "As Graduates Obsess about Jobs, Colleges Cut Spending on Career Services." The Hechinger Report. May 11, 2017. Accessed
February 22, 2019. https://hechingerreport.org/graduates-obsess-jobs-colleges-cut-spending-career-services/.
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house.gov/briefings-statements/cea-report-addressing-americas-reskilling-challenge/.
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the U.S. Department of Education. Accessed February 22, 2019. https://nces.ed.gov/fastfacts/display.asp?id=75.
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48 "Left behind." The Economist. September 10, 2011. Accessed February 22, 2019. https://www.economist.com/briefing/2011/09/10/left-behind.
49 Cohen, Patricia. "Bump in U.S. Incomes Doesn't Erase 50 Years of Pain." The New York Times. September 16, 2017. Accessed February
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February 22, 2019. https://www.nytimes.com/2017/06/16/opinion/sunday/sanders-corbyn-socialsts.html.
51 Ibid
52 Anzilotti, Eillie. "The End Of Capitalism Is Already Starting–If You Know Where To Look." Fast Company. September 18, 2017. Accessed February
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53 Morning Joe (May 9, 2017; MSNBC), TV.
54 Ibid
55 Strauss, Valerie. "Four Common Lies about Higher Education." The Washington Post. January 03, 2019. Accessed February 22,
2019. https://www.washingtonpost.com/education/2019/01/03/four-com-
mon-lies-about-higher-education/?utm_term=.c5bb7f932c09.

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